In a recent study carried out by the World Bank, ranking countries by “Ease of Doing Business”, Hong Kong claimed an impressive second place, while China ranked only 91st out of 183 countries.

In its annual survey, the World Bank looked at the commercial environment for domestically owned manufacturers with 10 to 50 workers. It investigated how governments provide structures to allow businesses to start, gain credit, protect investments, enforce contracts and other details.

In particular, small and private enterprises found it difficult to do business in China, the study concluded.

Among the findings involving China was that in the area of economic growth, the government still favoured large, state-owned companies.

In last year’s survey China placed 87th, but the World Bank in its current report hastened to add that China’s decline this year did not necessarily mean a step backward for the country, but rather it was most likely the result of other countries improving their business environments.

In terms of specifics, China placed 151st in ease of starting companies, 97th in investor protection and 67th in access to credit. It performed better in ease of registering property, placing 40th, and it ranked 16th in enforcing contracts, but these were the only areas in which China placed in the top 25 per cent.

With such clearly documented challenges facing businesses, it can be prudent to explore other ways to do business in Asia and China in particular. For example, ICS TRUST has three decades of experience incorporating Hong Kong-based companies and assisting them in using Hong Kong as a gateway for doing business in China. Such an approach provides access to Hong Kong’s world class banking, rule of law and an entrenched culture of doing business freely.

In a vivid example of Hong Kong's advantages, consider the issue around money supply in China. With inflation soaring, Beijing has moved to tighten up the money supply, in turn leading banks to restrict their lending practices. This has forced some private manufacturers to look to loan sharks for funds. Hong Kong's banking infrastructure mitigates such risky practices.

Elsewhere in Asia, Singapore placed first in the World Bank survey, South Korea placed eighth, Japan was 20th and Taiwan was 25th.

By Herb Shoveller